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Analysts turn less bullish on XPeng and Chinese Tesla challengers as Covid, heatwave, power crisis undermine EV sales

  • Consensus price targets for local industry bearers XPeng, Li Auto and Nio have been downgraded as old wounds undermine vehicle deliveries
  • Concerns about Covid-19 lockdowns, heatwave and power shortages in China have eclipsed recent stock market gains

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Workers assembling an XPeng EV inside a smart manufacturing factory. Photo: Handout
Cheryl Heng
Global money managers are turning bullish on Chinese electric-vehicle (EV) makers just as production curbs and supply-chain bottlenecks soured outlook and prompted analysts to trim their stock price targets.
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An MSCI index tracking EV-related stocks surged 36 per cent in May and June, aided by tax incentives to boost consumption and restore confidence in the economy. Since then, industry bearer XPeng has tanked 42 per cent, while Li Auto slumped by 23 per cent while Nio and the broader sector retreated by 10 per cent.

Past challenges that sent the industry into a tailspin have now re-emerged, including occasional Covid-19 lockdowns, close-loop factory management and power rationing in several mainland provinces that almost stalled the economy last quarter. XPeng and other rivals have also delivered a downbeat guidance on deliveries for the coming months.

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The three EV makers reported a 20 to 25 per cent slide in vehicle deliveries in July versus June. XPeng expects to deliver 29,000 to 31,000 EVs in the third quarter, about 40 per cent below Barclays’ forecast, while Li Auto also offered a downbeat assessment. Nio is due to report its earnings next month.

“XPeng provided much weaker than expected third-quarter guidance on vehicle deliveries,” Jiong Shao, China technology analyst at Barclays, said in an August 23 report and cut his price target for XPeng’s depositary shares to US$22 from US$30. He downgraded the stock to equal-weight, citing “heightened execution risks.”

Jefferies slashed XPeng’s price target on August 25 to HK$73.70 from HK$85.10 also citing weak delivery guidance, while retaining its hold recommendation. The stock last traded at HK$73.85 in Hong Kong and US$18.92 in New York on Friday.

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